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Four methods for claiming work-related car expenses

Individual Tax Return Basics:

Car Expenses – Four methods for claiming work-related car expenses

You can choose which of the following four methods for claiming work-related car expenses that gives you the largest deduction for any car and choose different methods for different cars. Some adjustments to your claim may need to be made if the car is jointly owned.

The four methods are:

Cents per kilometre method

12% of original value method

One-third of actual expenses method

Logbook method

If you use a borrowed car or a vehicle other than a car for work purposes, you can claim the costs you incur (such as fuel costs) as a travel expense. You can’t use any of the methods described here to calculate your claim.

Cents per kilometre method

Your claim is based on a set rate for each business kilometre.

You can claim a maximum of 5,000 business kilometres.

You don’t need written evidence but you need to be able to show how you worked out your business kilometres (for example, by producing diary records of work-related trips).

12% of original value method

Your claim is based on 12% of the original cost of your car or 12% of its market value at the time you first leased it.

The cost or value is subject to luxury car limits.

Your car must have travelled more than 5,000 business kilometres in the income year (or, if you used the car for only part of the year, it would have travelled more than 5,000 business kilometres had you used it for the whole year).

You don’t need written evidence but you need to be able to show how you worked out your business kilometres.

One-third of actual expenses method

Your car must have travelled more than 5,000 business kilometres in the income year (or, if you used the car for only part of the year, it would have travelled more than 5,000 business kilometres had you used it for the whole year).

You claim one-third of all your car expenses, including private costs (but excluding capital costs, such as the purchase price, the principal on any money borrowed to buy your car and the cost of any improvements).

For fuel and oil costs, you can keep receipts to work out the amounts or you can estimate them based on odometer records that show readings from the start and the end of the period you had the car during the year.

You need written evidence for all the other expenses for the car, as well as records that show the car’s engine capacity, make, model and registration number.

Logbook method

Your claim is based on the business-use percentage of the expenses for the car.

Expenses include running costs and decline in value but not capital costs, such as the purchase price of your car, the principal on any money borrowed to buy it and any improvement costs.

To work out your business-use percentage, you need a logbook and the odometer readings for the logbook period.

You can claim fuel and oil costs based on either your actual receipts or you can estimate the expenses based on odometer records that show readings from the start and the end of the period you had the car during the year.